We have used your software since 2019 and especially like the ability to try different scenarios to determine the impact of various assumptions on the bottom line.
In our community, and I suspect others, there are skeptics who don't believe a reserve study using this software is as good as having a "professional" do it. People have asked me if others are using this software to do their studies.
Would you be willing to share with us approximately how many associations have chosen to purchase the RFA to date?
I believe you are correct that there are skeptics that you describe. And, I understand the reasons they may have. Such as:
- Lack of knowledge about creating reserve studies and/or preparing financial forecasting
- Concern of liability implications
- Perception that a professional service provider will provide a higher quality product
- etc.
I have tried to address some of these concerns by creating a "library" of information to help overcome the doubts that people may have. For example, to address lack of knowledge I have tried to assure potential buyers that the RFA application is fully compliant with industry standards ... not only for the reserve study but also financial analysis and long range budget forecasting. The library contains many publicly available documents published by government agencies and industry sources to address:
- Physical analysis
- Financial analysis
- Typical standards for reserve component useful life
- Guidelines on how to determine remaining useful life of assets
- Standards for performing financial analysis and developing long term financial budgets
To address liability concerns, there is only one state, Nevada, which has legislated that the person conducting the reserve study must be registered by the Nevada State Department of Real Estate. And, even in that context there is room for an HOA to choose to perform the reserve study themselves as long as they do not designate a person(s) as a "reserve study specialist". No other state or province (to the best of my knowledge) has legislated who can perform the reserve study. States or provinces that have any legislation concerning reserve studies only state the requirement that they must be performed ... not who can perform them.
Additionally, I have always advocated that the HOA or association have a professional reserve study conducted if they have never had one before. If an association has never had a reserve study conducted, a full Type 1 study by a reputable firm should provide a comprehensive list of reserve components and their characteristics. Once that list has been developed, reasons for hiring a professional service company to merely update the financials are difficult to justify. This is not say that an individual association cannot conduct an initial physical analysis. And, certainly, a smaller association can easily conduct this. A larger association with perhaps hundreds of reserve components (e.g., a condominium development) might be wise to have the initial study performed by a service provider.
To answer your questions ...
- I have over 400 associations and HOA management companies that have purchased the RFA application.
- There are several golf clubs and/or resorts using the RFA application.
- Most users are HOAs and most have fewer than 200 units. There are several larger condominium developments as well as larger communities with more than 300 units.
- There are at least a dozen (perhaps more, I'm not sure) professional service providers who have purchased the RFA and actively use it in their business.
- There are customers in four countries ... USA, Canada, South Africa and Australia.
- The output / analysis from the RFA application has been subjected to scrutiny by accounting firms and several government agencies. I have yet to receive any communication that the application does not comply with any known standards.
I would like to conclude with an observation that I have made and I believe many will concur ... There are many "professional" reserve studies that are prepared which lack the basic properties of a comprehensive long-range financial forecast. According to the Government Finance Officers Association (GFOA),
"Financial forecasting is the process of projecting revenues and expenditures over a long-term period, using assumptions about economic conditions, future spending scenarios, and other salient variables." The vast majority of reserve studies prepared by professional service providers are not long-range financial forecasts as they ignore the key component of projecting revenues. This simplifies their tasks as they only try to forecast the long-range reserve component expenses and leave it to the association to try project revenue to meet their obligation to cover those expenses. Additionally, these service providers infrequently (if at all) develop any long-range spending scenarios to perform what-if analysis. The RFA application develops long-range financial forcasts that are inclusive of revenues
and expenses and it is very easy to create future revenue
and spending scenarios. I do not know of any other application for performing reserve studies that is as fully inclusive.
Regards,
Steve
